Vol. 471 No. 1
17 Mr. M. McDowell asked the Minister for Finance the estimated cost to the Exchequer of a three year public sector wage deal in the order of 10.5 per cent; and whether he will make a statement on the implications, if any, of such an increase in gross public sector pay on tax policy. [20435/96]
The main focus in the negotiation of the pay arrangements to follow the Programme for Competitiveness and Work will be competitiveness, which is the key to economic growth, employment and social progress. Against that background the aim will be to achieve pay moderation and certainty of pay costs, supported by reductions in taxation. Taxation is intrinsically tied in with the level of public expenditure, of which the public service pay and pensions bill is a major factor. An increase of 10.5 per cent in public service pay would add an estimated £505 million per year to that bill. Such an increase, as well as any other additional expenditure commitments sought in the context of a new programme, would, obviously, restrict the resources available for taxation.
Does the £505 million include pensions which would flow from such a rate of public sector pay increases? Is it not the case that a 10.5 per cent pay deal over three years would impose a cost on the Exchequer well in excess of £1.5 billion?
I cannot give the Deputy an answer to his first question. I suspect the figure is not inclusive. That information is not in the brief before me, but I will supply it to the Deputy. Will he repeat his second question?
Does this mean that over three years we are dealing with a £1.5 billion projected increase in expenditure in public service pay, if a deal of that kind was made?
I am glad the Deputy added the conditional clause, "if a deal of that kind was made". I can assure him that the detailed negotiations of a successor agreement to the existing Programme for Competitiveness and Work have only commenced and the question posed and costs associated with it will be of considerable assistance to the social partners.
Will the Minister agree that if instead of concentrating on gross pay increases of £1.5 billion over three years we concentrated our efforts on tax reductions for everybody, both in the public and private sectors, real take home pay could increase and the scope for tax reductions over those three years would be huge compared with anything that could be possibly contemplated if public sector trade unions demand a gross increase of £1.5 billion over those three years?
The presentation yesterday by the second secretary in the Department of Finance, Mr. Tutty, to the social partners outlined clearly the advances made over the past three years within which a clear link was drawn between economic growth brought about by an improved competitive position and enhanced take home pay, including tax reductions. There is a quantifiable lesson in that for everybody, irrespective of where they work or would like to work in our economy, that a combination of pay moderation and real tax reductions can leave money in people's pockets and can enhance the prospects of the economy. I agree with the Deputy that provided we can get that message across, how we share the cake becomes a secondary issue. The proof is in the existing agreement which delivered far more than anybody would have thought or was projected by the previous second secretary now the secretary of the Department, Mr. Mullarkey, when he made a similar presentation three years ago to a similar group of social partners.
Will the Minister agree it is not simply a matter of £505 million pounds in each year, if we are talking about a 3.5 per cent pay deal for each of the three years, because implicit in that deal is local and specialised wage bargaining, special cases and some form of negotiation on productivity and the like? Will he take this opportunity to indicate that kind of demand as an opening shot in a negotiation is totally inconsistent with making any significant progress over the next three years on tax reform?
The Deputy in using the clause, "that type of demand as an opening shot", has perhaps answered his question. I do not want to prejudice the outcome of the negotiations, but I will repeat what I said at the initial meeting of the social partners held in Dublin Castle on 23 October. As Minister with responsibility for the wider public service, including civil servants, and as an employer acting on behalf of the taxpayer, my experience of the local bargaining clauses in the public sector under the Programme for Competitiveness and Work has been far from satisfactory. Experience of the existing agreement must and will inform our attitude to any new agreement in regard to such types of subsidiary arrangements other than the headline agreement that might be arrived at.
